Arbitration Lawyer: For invoking arbitration or for filing petition for appointment of an arbitrator, limitation is of 3 years; SC.

Supreme Court of India

Justice Mohan M. Shantanagoudar, Justice N V Ramana and Justice Ajay Rastogi

The SC {M/s Geo Miller & Co. Pvt. Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd. } holds that it is settled law that the date of commencement of arbitration proceedings for the purpose of deciding which Act applies, upon a conjoint reading of Sections 21 and Section 85(2)(a) of the 1996 Act, shall be regarded as the date on which notice was served to the other party requesting appointment of an arbitrator.

It is further held that it is well­ settled that by virtue of Article 137 of the First Schedule to the Limitation Act, 1963 the limitation period for reference of a dispute to arbitration or for seeking appointment of an arbitrator before a Court under the 1940 Act (See State of Orissa and Another  v. Damodar Das, (1996) 2 SCC 216) as well as the 1996 Act (See Grasim  Industries Limited v. State of Kerala, (2018) 14 SCC 265) is three years from the date on which the cause of action or the claim which is  sought to be arbitrated first arises. 

It is held, however, the limitation period for invocation of arbitration would be three years from   the   date   of   the   cause   of   action   under   Article  137   of   the Limitation Act, 1963.

It is further held when the final bill   handed   over   to   the   respondent   became   due.   Mere correspondence of the appellant by way of writing letters/reminders to the respondent subsequent to this date would not extend the time of limitation. Hence the maximum period during which this Court   could   have   allowed   the   appellant’s   application   for appointment of an arbitrator is 3 years from the date on which cause   of  action   arose.

It is held in a commercial dispute, while mere failure to pay may not give rise to a cause of action, once the applicant has asserted their claim and the respondent fails to respond to such claim, such failure will be treated as a denial of the applicant’s claim giving rise to a dispute, and therefore the cause of action for reference to arbitration. It is held it does not lie to the applicant to plead that waited   for   an   unreasonably   long   period   to   refer   the   dispute   to arbitration merely on account of the respondent’s failure to settle their   claim   and   because   they   were   writing   representations   and reminders to the respondent in the meanwhile. Consequently, the appeal stands dismissed by SC.